Voltas Q3 margins surprise, but brokerages flag cost, demand risks

Voltas posted largely in-line revenue for Q3, but better-than-expected profitability, particularly in its UCP segment, prompted a reassessment of near-term margin trends among analysts.

Voltas’ December-quarter performance drew mixed reactions from brokerages, with stronger-than-expected margins providing near-term comfort even as commodity inflation, currency pressures and the pace of demand recovery remain key monitorables for earnings sustainability.

 

Voltas posted largely in-line revenue for the December quarter, but better-than-expected profitability, particularly in its Unitary Cooling Products (UCP) segment, prompted a reassessment of near-term margin trends among analysts.

 

Emkay Global said Voltas delivered flattish year-on-year (Y-o-Y) revenue of ₹3,060 crore, but margins surprised on the upside despite the quarter being seasonally weak for room air conditioners. UCP Ebit margin came in at around 3.8 per cent, well ahead of its estimate of about 2 per cent, while Electro-Mechanical Projects and Services (EMPS) margins improved sharply to 8.4 per cent due to more selective project execution. This resulted in a profit after tax beat of around 9 per cent versus Street estimates, it said.  ALSO READ | HDFC Securities starts coverage on LG Electronics India with 'Add'; check target 

While Emkay flagged commodity inflation, especially copper, and foreign exchange movements as near-term risks, it expects UCP margins to recover in the March quarter on better mix and cost levers. The brokerage reiterated its ‘Buy’ rating with an unchanged target price of ₹1,500, though it cut FY26 earnings estimates to reflect slower EMPS revenue growth.

 

ICICI Securities highlighted Voltas’ sustained leadership in the room air-conditioner (RAC) market, with year-to-date (Y-T-D) market share at 17.9 per cent. However, it noted that UCP margins contracted year-on-year due to continued channel support to liquidate older BEE-rated inventory ahead of the new energy efficiency norms. The brokerage expects price hikes in RACs due to regulatory changes, higher input costs and currency depreciation, which could support margins over the medium term. It maintained an ‘Add’ rating, revising its target price to ₹1,414.  ALSO READ | Dabur India sees modest profit growth in Q3, but Street remains cautious 

Morgan Stanley, meanwhile, maintained an ‘Equal Weight’ rating with a target price of ₹1,409, according to reports. The brokerage said margins were weaker than expected due to channel support and competitive pressures, with revenue, Ebitda and profit missing its estimates. While operational readiness for the upcoming summer season has improved, it said margin recovery remains a key monitorable.

 

Goldman Sachs reportedly remained cautious, retaining its ‘Sell’ rating with a target price of ₹1,210. While it acknowledged that third-quarter margins beat expectations on better UCP execution, it warned that input cost inflation could pressure margins in FY27. The brokerage also flagged continued losses at the Beko joint venture and limited upside from current margin levels, suggesting the stock is likely to underperform.

   

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